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Dharavi, a two-and-a-half-square-kilometresprawl of shanties in the heart of Mumbai, is not just hometo more than 8 lakh people. It’s also a hub of thousands of small businesses making everything from snacks to leather shoes. The kind of place where you expect to find the people most suited for Prime Minister Narendra Modi's new pension scheme.

But Mehmood Khan, who sorts electronic waste at the Dharavi dumpyard, isn’t eager to join. “I’ll contribute every month but what’s the guarantee that I will get the pension after turning 60?” he asked. Khan’s Rs 10,000-a-month income is barely enough to meet his family’s basic needs. “I won’t live that long either with the kind of work I do. What I have now is what I live with.”

Not a single person among 35 workers BloombergQuint spoke to in Asia’s second-largest slum was either inclined to contribute or had the resource to spare an amount not even enough to buy a movie ticket at a multiplex. Almost everyone didn’t trust the government with their money.

Waste sorters huddle together at the dumpyard in Dharavi, Mumbai. (Source: BloombergQuint)

The Modi administration’s intent can’t be faulted. The ratio of India’s population above 65 years is expected to at least double to 19.8 percent by 2050, according to the United Nations World Population Prospects 2017 data. The nation with 1.3-billion people is at risk of not saving enough for rising burden of taking care of the elderly.

Finance Minister Piyush Goyal said in his budget speech there are 42 crore workers in the informal sector who contribute nearly half of the country’s GDP. The Pradhan Mantri Shram-Yogi Maandhan promises to pay Rs 3,000 a month to 10 crore such beneficiaries after they turn 60. The workers aged between 18 and 29 years will have to contribute Rs 55 a month and those above 29 have to pitch in with Rs 100. The government will match their contributions, and allocated Rs 500 crore for 2019-20. The scheme isn’t exactly new. It’s a restructured version of a plan that promised a lower amount.

Subhash Bhatnagar, a social sector worker for 33 years, isn’t optimistic. This will fail just like the other government pension schemes, the chief functionary on the governing board of NIRMANA— a Delhi-based non-government organisation for informal economy workers—told BloombergQuint over the phone.

A contributory scheme for those who neither have job guarantee nor a fixed salary or a place of work won’t be able to pitch in on a regular basis, according to Bhatnagar. “Plus, the pension amount of Rs 3,000 a month is not adjusted for inflation and will be a petty figure for a worker who turns 60 in two decades.”

The track record of the erstwhile Atal Pension Yojana, launched in May 2015, isn’t stellar either. It initially targeted to enroll 2 crore subscribers by Dec. 31, 2015. Three years later and after scaling down the target multiple times, a government notification said it had 1.10 crore contributors as of May 2018.

Distrust After Demonetisation

BloombergQuint found that trust in the government is one of the major hurdles.

Chandru Kumar, 27, has never gone to school and earns Rs 500 a week from collecting waste. His biggest worry about participating in a contributory pension scheme: “I won’t get anything. The government officials will pocket the money before benefits could reach us.”

Like Kumar, many such workers lack even elementary education, forcing them to rely on middlemen to access welfare schemes. Nayab Ali, 24, who has been sorting electronic waste in Dharavi’s waste dump for 14 years, said he tried to avail an insurance scheme earlier but the agent ran away with his money.

Dharavi has a population of 8 lakh, according to SVR Srinivas, chief executive officer of the Dharavi Redevelopment Project. And it has more than 13,000 small businesses.

Syed Waris Ali, 53, works in one such unit that makes leather goods. And he lost trust in the government after the back-to-back disruptions of demonetisation and goods and services tax reduced his income by nearly half. Ali filled forms to get a below-poverty-line certificate and the state-sponsored health insurance, but those are still pending, he said. “This new pension scheme is also a false promise to get votes.”

Water pipelines run across Dharavi slum in Mumbai. (Source: BloombergQuint)

Yasim Qureshi, 35, works for 12-15 hours a day transporting waste to scrap dealers in a small commercial vehicle for Rs 12,000 a month. “I read in papers regularly that some scheme has been announced,” he said. “It’s of no use because we don’t know how to access those benefits, and nobody tells us how.”

Others said they don’t make enough to pay for it. Akhtari Nisha, 45, and her 26-year-old daughter Mushtari Banu sort rags in a tiny rented hovel that’s also the home to the family of 10 by the night. “We are barely able to meet our food, water and rent expenses,” Akhtari said. “How will we save money?”

Anita Jangham, 35, a domestic worker who earns Rs 1,500-3,000 a month by cooking at homes, too said that her income is barely enough to meet daily expenses and education costs of her children.

Inadequate awareness, lack of trust and low income led to poor participation in earlier pension schemes, according to Sandhya Seshadri Iyer, chairperson, Centre for Public Policy, Habitat and Human Development at the Tata Institute of Social Sciences. While the policy is in the right direction, Iyer said, “It’s vague in its design and lacks perspective on the needs of labourers in the informal sector.”

The scheme, however, promises higher benefit at half the monthly contribution compared with the Atal Pension Yojana. A higher co-contribution by the government will work as an incentive for the beneficiaries to switch to the new scheme, said Hemant Contractor, chairman of the Pension Fund Regulatory and Development Authority.

Logically, I would expect a higher enrolment under the new scheme than the earlier ones. But that would get clearer when the government gives more details on its distribution.

Hemant Contractor, Chairman, PFRDA

Iyer, however, suggests a scheme funded through a sovereign fund that solely caters to improving the quality of life of unorganised workers. And it requires an autonomous regulator, she said, as the initiative is aimed at addressing the needs of the most vulnerable population.